Citi shareholders speak on pay

By Ben Walsh

April 18, 2012

The shareholders have finally spoken. In a move that rebuked Citigroup management and the board of directors, the bank’s shareholders rejectedthe proposed $15 million pay package for CEO Vikram Pandit, as well as pay for three other execs.

Just this week, Citi released first quarter earnings that beat expectations, but signs of a stronger balance sheet haven’t been enough to cover the broader story here. Citigroup’s stock is down 44% in 2011, and 89%under Pandit’s tenure. Only a month ago the bank failed the stress test and then defended its capital position by, in part, calling the Fed’s evaluation “hypothetical.”

Shareholder rejection of management pay is exceedingly rare, but in this case it was far from radical: the ever cautious ISS recommended voting against the package not on the size of Pandit’s pay but on its lack of performance incentives. It’s those incentives that make executive pay material to shareholders at a $100 billion institution.

Shareholders may have finally fought back against pay for Citi execs, but it is worth remembering that executive compensation is an original sin of Pandit’s tenure at Citi. Pandit’s compensation for joining Citi through the acquisition of the asset manager he co-founded may climb to $200 million. And that acquisition, which cost Citi $800 million at the time and has since been closed and almost entirely written off, was reportedly done for the purpose of bringing Pandit into the Citi leadership.

For all the grandstanding about Pandit’s 2009 salary of $1, Citi shareholder’s seem to be at long last realizing that their financial returns for the last five years are a far cry from Pandit’s.

Note: this is an excerpt of the full Counterparties email, which is available here.